Introduction to the US Money Transmitter License Application Process
If you’re looking to obtain a money transmitter license (MTL) in the United States, you’ll need to go through a process that can be both time-consuming and expensive. In this memorandum, we provide an overview of that process and what you can expect along the way.
There are two basic ways you can go about obtaining a money transmitter license
- You can either handle the entire application process yourself, (with help from us), or
- You can also have us take a lead and help you with the complete task of filing and managing the application on your behalf.
Before starting the process of obtaining a money transmitter license, it’s important to understand which states require one. This will help you focus your efforts and save time and money.
Our company can help you with this process by reviewing your business model and determining which states require a license. We’ll also provide guidance on the specific transactions and assets that will need to be considered when applying for licenses in those states. This will help you avoid any costly surprises and save time and money along the way.
After you’ve determined which states require an MTL, the next step is to begin the application process. This will involve completing and submitting several forms to each state’s financial regulator. The forms can be complex, and it’s important that they’re completed accurately and in a timely manner.
When it comes to obtaining a money transmitter license, there are many things businesses need to consider in advance. One of the most important issues is what entity will actually file for and hold the licenses. Will this be done directly by the company, or will a subsidiary or other separate entity be established for this purpose? Many companies opt to create a subsidiary or separate entity to hold and manage the licenses. This often reduces the number of people who will be subject to scrutiny and review and also speeds up the process.
The process of setting up a subsidiary can be complex, but it’s a great way for a company to expand its reach. Here are some tips on how to do it:
- Make sure the subsidiary is fully capitalized. This means that it has the financial resources to operate independently.
- Clearly disclose the subsidiary in marketing and paperwork. This will help avoid any confusion later on.
- Make sure the subsidiary has experienced and knowledgeable staff. This will help it run smoothly and effectively.
- Have a services agreement in place between the company and the subsidiary. This will ensure that both parties know their roles and responsibilities.
- Decide in advance who will own and control the subsidiary. This is important in order to avoid any future disputes.
- Choose individuals with strong personal, educational, and financial backgrounds to serve on the Board and as chief officers. These people will be under close scrutiny, so it’s important to choose wisely.
Once we know which entity will apply for the licenses, and who the “control persons” subject to scrutiny will be, you will need to:
- Compile a list of priority states based on where you do business.
- Provide contact details for the person at your company who will be responsible for providing documents, organizing payments, and answering questions from the licensing authority.
- Compile the required data and documents for the application filing process.
We would recommend that this be the person who will take over day-to-day maintenance of the licenses, once they are issued.
It is important to note that in California, you will need to request a meeting with regulators and provide certain documents in advance before your application will be accepted.
Phase 1: Qualifying to do business.
To operate a money transmitter business (MTB), you must be qualified to do so in each state in which you plan to conduct business. The Company may have already completed this process, but we would need to confirm this before submitting the MTL application. In order to establish a separate entity that will conduct MTB operations, the entity will need to get “qualified.” Corporation service companies that handle filings and renewals can serve as your Registered Agent in the states, and our paralegal services will assist you in doing these filings.
Phase 2: Preparing the applications.
When applying for a money transmitter license, businesses need to submit a lot of information. This includes both safety and soundness checks of the proposed business, as well as character and fitness investigations of key personnel. Gathering all this information can often take longer than it seems at first. In our experience, it usually takes several months for applicants to gather all the required information and to get all the key personnel to supply the information for the character and fitness investigations.
The company may need to provide the following documents depending on the state’s requirements.
- Information about the company and its executives’ character, fitness, and experience.
- Personal information, including fingerprints for officers, directors, and certain direct or indirect owners.
- Disclosure statements.
Money transmitter licenses are handled primarily through the Nationwide Multi-state Licensing System and Registry (NMLS). In order to apply for a money transmitter license, businesses must input some very personal financial data. Some clients feel more comfortable and find it more efficient to input that information themselves from their own offices, rather than having us do it. If you’re more comfortable inputting the data yourself, we can assist you with how to use the NMLS system.
- Basic information about the product and services offered;
- A three or five-year business plan with financial projections;
- Corporate organizational chart;
- Evidence of registration with FinCEN as a Money Services Business;
- A description or a copy of the applicant’s anti-money laundering program;
- Copies of the applicant’s standard customer and client contracts;
- Qualifications to transact business/evidence of good standing;
- Surety bonds or alternative deposits;
- Fidelity / Errors & Omissions coverage;
- Audited and/or interim financials; and
- Agent/delegate information, if applicable.
Next, we’ll provide the Company with an initial list of materials that we need to begin MTL applications. If the company wants, we can start by creating a complete matrix that lists all state requirements so they can go through the process of gathering data only once.
The second approach is for us to prepare the applications. We will take the information you provide and create finalized applications with attachments and a cover letter. The applications will be provided to you in your office for review and signature. If a notarization requirement is needed, we can have a notary come to your office to notarize the signatures. Once signed, we will make copies of the applications and submit them.
Before you can apply for a money transmitter license, your company needs to meet some financial requirements. This usually includes:
- Application/licensing fees: usually costs around $2,000 but can go as high as $7,500. You have to pay this fee when you submit your application, and we will hold it in an escrow account until everything is approved.
- Net worth requirement: the amount varies based on how active your company is and how many branches or agents/delegates you have. But in most states, it’s between $250k and $500k.
- The surety bond: there is a required base amount but that may be increased depending on how active your company is or how many branches or agents/delegates you have. The cost for this bond could be as high as $5 million, but it’s usually capped at $1 million or less.
- Depending on your company’s credit rating, the annual costs to provide these bonds would likely range from 1% to 2% of the bond amount.
Once you obtain an MTL, you will be required to pay an annual fee as well as incur some additional costs such as audit and reporting costs.
To ensure a smooth and efficient MTL filing process, follow these steps:
- The first step is to have weekly meetings/calls with your team to track progress and make sure everyone is on the same page. This will help avoid any delays or confusion.
- You should also submit weekly status reports to track progress on all pending applications. This will help you stay organized and on top of things.
- Finally, it’s important to have access to a knowledgeable member of your staff who can help with the application process. They will be your day-to-day contact and can provide support with filling out the forms.
Phase 3: Application consideration and timing.
When applying for a money transmitter license, you’ll want to be aware of the different states’ application processes. In general, most states take 1-6 months to issue a license, assuming there are no material issues. However, some states, like New York, can take significantly longer. Before you apply, be sure to check with the state’s licensing authority to learn about their specific requirements. You may also need to participate in a pre-application meeting with your senior management before applying.
When you apply for your money transmitter license, it’s important to know that the process can vary significantly from state to state. That’s why we recommend prioritizing your applications based not only on where you do business but also on the estimated processing time. Apply for states that take longer to evaluate and process applications first, followed by 1-2 quick states just to obtain a few victories. Furthermore, about half of the states have partially streamlined their application procedure, so we recommend applying to one of those states as part of your initial application round. The common aspects for each member state will be reviewed and approved by one state in the coalition. You’ll then need to follow any remaining state-specific conditions.
Overall, we expect to complete all applications in the first 4-8 months, with licenses acquired in 6-12 months as a result of our experience and expertise. States like New York are an exception, however, and will most likely take longer.
Estimated Costs
Money transmitter licensing can be a costly process, with costs ranging from $100,000 to $600,000. The cost of the licensing process depends on the approach you take: if you handle the application preparation yourself, with some guidance from us, the cost will be in the range of $100,000- $250,000. If you ask us to prepare the applications, it is likely to cost between $225,000 and $600,000.
In addition to the application fees, you may also need to pay for a compliance review by an experienced professional firm. The costs may increase if you ask us to analyze multiple transaction types for determining the type of license required or analyze multiple flows of funds. Based on your requirements, we can provide you with a scope of work outlining the services we will offer for your MTL filing process.
Starting your MTL application process in one of the states where the process is more difficult is recommended. California, Texas, Florida, and New York all have more stringent application processes than most other states. Even so, it’s still worth starting there, because it will make the process easier for the remaining states.
Depending on the state involved, the money transmitter license application costs vary. Our assessment of the difficulty of obtaining a license in each state puts the costs at various tiers. The full pricing can be seen in the table below (opens in a new browser tab).
Money Transmitter License Application & Associated Costs for Each State
US Money Transmitter License Pricing Sheet
- Normal states: These include – Alabama, Alaska, Connecticut, Delaware, Maine, Maryland, Mississippi, Missouri, Nevada, New Hampshire, North Carolina, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, US Virgin Islands, Utah, Vermont, and Wisconsin.
- Difficult States: These include – Arizona, Arkansas, District of Columbia, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Minnesota, New Jersey, Puerto Rico, Rhode Island, Tennessee, Virginia, West Virginia, and Wyoming.
- Very Difficult States: These include – California, Texas, Florida, and New York (including the New York BitLicense)
Money transmitter licenses can be costly, depending on the number of states in which you decide to apply. However, these estimates do not include the cost of preparing required documents such as a compliance manual, business plan, etc. which can add significant expense. If you’re not prepared, we can provide a separate quote for those costs. The final cost also depends on whether there is any follow-up work required after an application is submitted.
When applying for a money transmitter license, there may be some additional costs involved depending on the state. These may include:
- Communication with regulators (in general, we anticipate that 10-15 states will have follow-up questions about the application).
- Addition of extra criteria to the application by the state regulator that is not stated in the application.
- Settling/communicating with the state regarding a substantial dispute or disagreement with you about the completeness of your data.
We hope this information is helpful, and please don’t hesitate to reach out if you have any questions or would like to discuss the next steps.
—
This page was last updated on June 1, 2023.
–